The following is a guest post by Dan Way of the John Locke Foundation:

A $470-million surge in April tax collections could push the state budget surplus to more than $700 million.

Barry Boardman, chief economist for the General Assembly’s nonpartisan Fiscal Research Division, in a Monday, May 6, email alerted legislative leaders of both parties, House, and Senate budget writers.

He called it extraordinary, unexpected revenue.

Final individual income tax payments exceeded projections by $395 million and were 46% higher than April of last year.

“This is the largest year-over-year increase in payments since 2005, when payments increased by 52%,” Boardman wrote.

Wage and salary income withholding have tracked close to forecast, so the growth in final income tax payments is almost entirely the result of higher non-withholding income such as capital gains and dividends, he said.

April’s corporate income tax collections grew 42% over last year and exceeded April’s projection by $75 million.

Combined with prior surplus revenue collections, the total is now close to $700 million. Other states are experiencing similar results, Boardman said.

The numbers are preliminary, Boardman said. Fiscal staff is awaiting a final accounting of April’s tax collections from the state Department of Revenue to determine how much of the money is a one-time collection, and how much of the tax growth can be expected to recur in future years.

That will be a key in revising the state’s consensus revenue forecast. That mechanism determines how much money is available for the current budget and guides spending decisions on programs and services. The revenue forecast also gauges how much money could be diverted to the state’s rainy day fund, a savings reserve created to buffer against economic downturns and the need to raise taxes.

The information also will play a role in the two-year budget now being debated in the General Assembly. The House has passed a $23.9 billion spending plan, and sent it to the Senate.

If the surprise revenue is a one-time event, lawmakers might be wise to plug it into savings, or reduce unfunded pension and State Health Plan liabilities rather than fund salary increases or expand programs and services in upcoming budgets, said Joe Coletti, senior fellow at the John Locke Foundation specializing in budget and fiscal policy.

If it is all recurring revenue, or a combination of recurring and one-time funds, budget writers may decide to split it between savings and programs, but could still consider plowing it all into savings.

The budget the House sent to the Senate contains $600 million in unappropriated funds. With the addition of $470 million in unanticipated revenue, senators now will have a decision on how to handle more than $1 billion that is not designated for a specific use.

The preceding article was written by Dan Way and was first published by the Carolina Journal on May 6, 2019 and reappears here with permission. Mr. Way is the Carolina Journal’s Associate Editor.

Today, N.C. House Majority Leader John Bell sent a letter, signed by over 50 members of the Republican Caucus, to Governor Roy Cooper urging him to respect the will of the voters by replacing Chief Justice Martin with someone who has a similar ideological background and pedigree. Martin, the longest-serving justice on the state’s Supreme Court, announced his plans last week to retire next month.

“It would be extremely troubling to ignore the voters’ wishes and unilaterally alter the balance and make-up of the court by appointing a liberal judge who does not share the same values that Chief Justice Martin was routinely re-elected to carry out,” the letter states. “We urge you to reject any effort to politicize the North Carolina Supreme Court in order to achieve partisan goals – something you have adamantly spoken out against in the past.”

The full letter can be read below.

January 31, 2019

Governor Roy Cooper
116 West Jones Street
Raleigh, NC 27603-8001

Dear Governor Cooper,

We are writing in regard to the resignation and replacement of Chief Justice Mark Martin on the North Carolina Supreme Court. Chief Justice Martin served the people of North Carolina with great integrity for over 20 years.

As members of the North Carolina General Assembly, we are hopeful that you will honor his legacy and respect the will of the voters by appointing someone with a similar ideological background and pedigree.

It would be extremely troubling to ignore the voters’ wishes and unilaterally alter the balance and make-up of the court by appointing a liberal judge who does not share the same values that Chief Justice Martin was routinely re-elected to carry out. We urge you to reject any effort to politicize the North Carolina Supreme Court in order to achieve partisan goals – something you have adamantly spoken out against in the past.

The state House of Representatives enacted voter ID into North Carolina law on Wednesday, implementing a ballot referendum approved by voters in November with the legislature’s twenty-first veto override of Governor Roy Cooper.

The veto override by the state House is the General Assembly’s final legislative action enacting voter ID into North Carolina law. It follows approval by the people of a proposed constitutional amendment to require photo ID at the polls in the November midterm election.

Gov. Cooper’s veto message also said SB824 was “designed to suppress the rights” of voters, even though the bill allows any voter to assert a “reasonable impediment” at the polls for why they don’t have a qualifying ID.

The legislation further accommodates religious objectors, provides for free state-issued IDs, and accepts a broad range of qualifying IDs including student IDs, drivers’ licenses, passports, military and veteran IDs, voter and state employee cards, and Native American tribal cards. SB824 even allows drivers’ licenses from other states to qualify in some circumstances.

Speaker Tim Moore (R-Cleveland) has filed legislation proposing voter ID in North Carolina in every legislative term since first taking office in 2002.

“Delivering a voter ID law to North Carolinians who supported this simple yet essential election integrity measure on the ballot in November was a constitutional imperative,” Moore said.

“I’m proud of the commitment House lawmakers made to finish this accomplishment and keep our promise to the people of North Carolina who approved voter ID in our state constitution.”

Thirty-four other states have some form of voter ID law. North Carolina is the last state in the Southeast not to require some form of voter ID.

Rep. David Lewis (R-Harnett), a chairman of the House Committee on Elections and Ethics Law, noted Gov. Cooper’s voter ID veto was issued at 4:00 p.m. on a Friday “to bury his defiance in a news dump with inflammatory language to keep his political base on his side.”

“My district is full of good, hard-working, well-intentioned people – there is nothing sinister or cynical about them,” Lewis said. “The governor does not have a problem with this legislature, he has a problem with his citizens.”

“This bill does exactly what the people of this state wanted us to do.”

State lawmakers yesterday allocated $793 million in additional Hurricane Florence relief funding in response to the preliminary needs assessment released last week, bringing the legislature’s total commitment to disaster recovery since the storm to $850 million. For comparison, after Hurricane Matthew, the legislature appropriated $200 million two months after the storm. With this latest action, the North Carolina General Assembly has allocated over $1.2 billion for hurricane recovery since 2016.

Representative Arp is a primary sponsor of the legislation.

The Hurricane Florence Disaster Recovery Fund (HFDRF) appropriates $65 million to provide a state match for federal disaster assistance and another $65 million state match for federal transportation assistance. It spends $60 million on capital recovery funds for public school facilities and $30 million for capital needs in the University of North Carolina system. Another $28 million will benefit local governments, while agriculture recovery received $50 million. More than $30 million was directed to housing recovery support.

Tens of millions more dollars will meet needs in behavioral health, community hospitals, small businesses, community colleges, and mosquito abatement efforts in areas of North Carolina affected by Hurricane Florence. Funding for coastal beach renourishment, dredging needs, marine debris cleanup, and commercial fishermen were also included in the recovery package.

The measure includes a fix for members of the National Guard who participated in the response to Hurricane Matthew. The bill waives outstanding debt service members owed due to accidental overpayments by the Department of Public Safety (DPS). It also requires DPS to reimburse service members who already repaid the department.

As part of the continuing collaboration among state leaders to respond to the historic storm, officials from the Office of State Budget and Management (OSBM), including State Budget Director Charles Perusse, briefed key appropriations leaders and fiscal staff in the North Carolina legislature on Thursday. Participants discussed the Governor’s proposal at length in a productive working session.

OSBM told lawmakers that, consistent with the descriptions contained in the Governor’s report, the needs assessment released this week was a preliminary figure that may change based on further analysis and the availability of additional federal aid. OSBM also said that this is a long-term, five-year plan.

The report indicated that more concrete, on-the-ground data will soon be available to update the preliminary needs assessment, which relied in part on computer modeling. As such, some assessed needs may shift considerably over time as federal aid becomes clearer and damage assessments continue. Education needs, for example, are particularly preliminary, and many of the damage assessments will change in OSBM’s final report, lawmakers and staff heard from administration officials.

OSBM is also working on an estimate of how much funding could be spent in the next six months. They indicated that course corrections may be required over time. Based on this information and the Governor’s report, the legislature appropriated a majority of the funding immediately while preserving maximum flexibility to meet the final needs assessments that are currently ongoing.

Most of the funding transfer comes from the state’s record $2 billion rainy day fund.

In a joint statement, state House Speaker Tim Moore (R-Cleveland) and Senate Leader Phil Berger (R-Rockingham) said, “Since Hurricane Florence hit, we’ve sought to take politics out of the relief effort. Today’s historic, bipartisan aid package is yet another step in a collaborative recovery process that we hope will continue.”

State lawmakers convened in Raleigh on Monday for the second time in as many weeks, and are scheduled to go into session again in November. The legislature plans to continue collaborating with state agencies as they finalize their needs assessments for Hurricane Florence.

According to the most recent report on Hurricane Matthew funding, approximately $124 million has been disbursed, $115 million has been awarded, and $121 million remains available out of the total $360 million allocated in prior disaster recovery packages since 2016.